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We sold a million units: the role of advertising past-sales

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  • Moraga-González, José Luis
  • Monteiro, P. K.

Abstract

In a market where past-sales embed information about consumers’ tastes (quality), we analyze the seller’s incentives to invest in a costly advertising campaign to report them under two informational assumptions. In the …rst scenario, a pooling equilibrium with past-sales advertising is derived. Information revelation only occurs when the seller bene…ciates from the herding behaviour that the advertising campaign induces on the part of consumers. In the second informational regime, a separating equilibrium with past-sales advertising is computed. Information revelation always happens, either through prices or through costly advertisements.

Suggested Citation

  • Moraga-González, José Luis & Monteiro, P. K., 1999. "We sold a million units: the role of advertising past-sales," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 357, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:357
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    References listed on IDEAS

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    Cited by:

    1. Hiroshi Kitamura, 2007. "Capacity Expansion in Markets with Intertemporal Consumption Externalities," Discussion Papers in Economics and Business 07-11, Osaka University, Graduate School of Economics.

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